When it comes to estate planning, many tools are available to help you protect your assets and ensure that they pass on to your beneficiaries. One of the most popular estate planning tools is a trust.
Not only can a trust be used to simplify the estate planning process, but it can also play an essential role in protection from creditors. How do trusts work, and how can they help shield your assets?
Choosing the right trust for you
Before beginning the process of establishing a trust, it’s imperative to understand the available options and the benefits and drawbacks that each type of trust possesses.
Revocable Living Trust
Revocable living trusts can be changed anytime during the creator’s life. It allows you to retain control over your assets while still being able to provide for your beneficiaries after you pass away.
Irrevocable Living Trust
Unlike a revocable living trust, an irrevocable trust cannot be changed or revoked once created. While it offers greater protection from creditors and lawsuits, it also means that you give up some control over your assets.
A testamentary trust only goes into effect after the person who created it passes away. You can use a testamentary trust to provide for minor or adult children who cannot manage their finances independently.
Special Needs Trust
A special needs trust can be set up to provide for the needs of a person with disabilities. One of the more significant advantages of this trust is that it allows people with disability to maintain their eligibility for government benefits such as Medicaid or Supplemental Security Income.
Charitable trusts allow you to donate assets to a charity or nonprofit organization while still providing income for yourself or your beneficiaries during your lifetime.
A spendthrift trust restricts the beneficiary’s access to the trust and protects the assets placed into the trust from being seized by creditors or used to pay outstanding debts.
Selecting the correct type of trust is vital to protecting your estate and loved ones from creditor harassment. If you are still unsure about which trust option is best for your unique financial situation, it may be in your best interests to reach out to a local estate planning attorney in your area.